Pennsylvania (PA) recently enacted legislation that changes how local sales tax is applied to taxable sales made to customers in Philadelphia and Allegheny counties.
Under Act 21 of 2026, businesses that are already required to collect PA’s 6% state sales tax may now also be required to collect and remit the applicable local sales tax based on where the customer receives the product or service.
The change is particularly important for businesses that sell taxable products or services to customers throughout the State, including businesses that may not have a physical location in Philadelphia or Allegheny County.
What Changed?
Historically, local sales tax in Philadelphia and Allegheny County was generally determined based on the point of sale, meaning the location of the vendor. Act 21 changes this rule going forward, so that local sales tax is now generally determined by the point of destination, meaning where the taxable product or service is delivered to the customer. This change brings the local tax rules more in line with PA’s existing state sales tax rules.
Impact of the new rules:
- Philadelphia: An additional 2% local sales tax applies to taxable sales delivered to customers in Philadelphia.
- Allegheny County: An additional 1% local sales tax applies to taxable sales delivered to customers in Allegheny County.
- The existing 6% PA state sales tax remains unchanged.
For example, a PA business located outside Allegheny County that ships a taxable product to a customer in Allegheny County may now need to collect 7% total sales tax (6% state tax plus 1% Allegheny County local tax). Similarly, a taxable sale delivered to a customer in Philadelphia may be subject to 8% total sales tax (6% state tax plus 2% Philadelphia local tax).
When Does the Change Take Effect?
Act 21 of 2026 was enacted on July 12, 2026, with a retroactive effective date for tax years beginning after December 31, 2025.
While the law is already in effect, the PA Department of Revenue recognizes that businesses need time to update their systems and processes. Therefore, the Department has announced that it will not begin enforcing the new requirements until October 1, 2026.
Businesses should not interpret the October 1st date as the effective date of the law. Rather, it is the Department’s announced enforcement date in order to provide businesses with additional time to become compliant.
What Does This Mean for Businesses?
Businesses making taxable sales should review how they determine the appropriate sales tax rate for each transaction. They should also consider whether their accounting, invoicing, and point-of-sale systems can identify the customer’s delivery location and apply the appropriate local tax. Businesses that sell products online, ship products directly to customers, or provide taxable services to customers throughout PA should pay particular attention to this change.
For example, consider a business located in Butler County that sells taxable equipment to customers throughout PA. Before this change, the business may have generally focused on its location when determining the applicable local sales tax. Under the new rules, the business must consider where the taxable sale is delivered. A taxable sale delivered to a customer in Allegheny County could be subject to the additional 1% local tax, while a taxable sale delivered to Philadelphia could be subject to the additional 2% local tax.
For the most current guidance, visit the PA Department of Revenue’s Local Sales Tax page.
Businesses with questions may also contact the PA Department of Revenue’s Online Customer Service Center or call the Department at 717-787-1064.
